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Olympic accounting shows Games broke even

Blog by Nick Swinburne | December 21st, 2010

On paper, the 2010 Olympic and Paralympic Games were a break-even exercise, as any chance of earning a profit evaporated alongside $15 trillion in wealth in the economic collapse of 2007. One minute sponsorships were exceeding expectations, the next they were so low that VANOC had to go to the province and federal government to help fund the Opening Ceremonies.

According to the final numbers released by the Vancouver Organizing Committee, the Games met their operating budget of $1.9 billion almost to the penny. As well, $603 million of the total was invented in venues, which came in on time and on budget.

"We made a promise and we repeated it many times that we would not leave behind a bad result and we would not leave behind an unpleasant financial surprise at the end of the Games, and it was our priority all through those years to keep our word and live up to that promise," said former VANOC CEO John Furlong on Friday, presenting the final accounting from the Games.

The report was delayed by ongoing issues, such as the attempt to recover $2 million that was lost in a ticket scam. Only $500,000 was recovered.

There's no question VANOC had its challenges. Sponsorships initially exceeded expectations, with Bell, CTV and others who came on board prior to 2007 paying record rates. But the economic collapse resulted in far lower corporate interest at Games time than the organizers anticipated. That forced VANOC to go to the provincial and federal governments for $187 million for their operating costs - including almost $20 million for the opening ceremonies and torch relay, and funding for the Paralympics.

The International Olympic Committee, also recognizing the tough economy, contributed an additional $22 million. VANOC only used some of that money, according to reports.

While critics have dubbed them "the bailout Games," Furlong pointed out that 91 per cent of their operating costs came from non-government sources - mainly corporate sponsorship.

However, many suggest that the true cost of the Games were much higher, in the order of $5 billion when all the infrastructure upgrades and security costs are included.

On the infrastructure front, VANOC's budget did not include the $600 million Sea to Sky Highway Improvement Project, $2 billion Canada Line or the new Vancouver Convention Centre which came in at $883 million, or almost double the original budget.

On security, the total costs were estimated last week at almost $854 million, with the federal government covering about 72 per cent of the total. That's slightly less than the $900 million expected, but far more than the $175 million touted in the original Games budget.

Various Crown corporations also assumed additional expenses related to the Games that weren't included in VANOC's budget. One example is the hydrogen buses and new transit facility for Whistler that was partially funded by B.C. Transit and the Resort Municipality of Whistler. B.C. Hydro assigned staff to help out with the Games and purchased tickets for workers to attend Olympic and Paralympic events.

In November it was announced that the Vancouver athletes village was in receivership, with the City of Vancouver on the hook for $750 million of the $1.2 billion loan they guaranteed to the project developer. Roughly 454 market unites out of 1,108 units in 25 buildings had yet to be sold at the time of the announcement.

In Whistler, where the municipality took out a $100 million loan to build the athletes village, only one out of 20 market units has been sold, prompting the Whistler 2020 Development Corporation to withdraw them from the market. However, virtually all of the resident-restricted housing has been sold and it's expected that the municipality will be able to pay back all but $13 million of the original loan this year, then refinance the remaining $13 million on roughly $17 million in real estate.

David Eby, the executive director of the B.C. Civil Liberties Association, called VANOC's claim of a balanced budget "ridiculous."

"I read the news and the headlines with just total disbelief," he said on Monday. "The security, the venues, the transportation, the convention centre - everything was over budget, literally everything. The only thing that was not over budget were the revenues that VANOC took in, which were dramatically under budget.

"I don't know which kind of math they used to break even, but I know it involved a large number of unexpected subsidies."

In June, the B.C. government acknowledged that it spent $925.2 million on the Games, or $325 million more than budgeted - a figure that includes VANOC's operating costs but doesn't include highway upgrades or the Canada Line.

Eby says there is a lot of debate as to what qualifies as a specific Olympic expense. For example, you could argue that the Sea to Sky Highway Improvement was needed, as well as the Canada Line and Vancouver Convention Centre. However, he says there's still a lack of clarity surrounding expenses that are most definitely for the Olympics - like security.

"For things that were unambiguously Olympic expenses, we still don't have a final tally," he said. "For example, how can VANOC say they came in on budget knowing their security expenses were five times what was budgeted. That's not a legacy, that's security for the event, and nobody debates that this is an Olympic expense."

Eby says it will take a change of government, or leadership, for the true costs of the Games to come to light.

"We will never actually know if they actually broke even, and I suspect they ran a very large deficit," he said. "The only way we could ever get to be an informed citizenry is if the auditor general for B.C. or for Canada was given access to VANOC as well as provincial and federal government expenditures, and that may never happen.

"The system was built so we would never get a true number. VANOC is exempt from federal and provincial and non-profit operating rules, they're exempt from an auditor general's review. They're federally and provincially exempt from Freedom of Information rules, and in fact when they met with ministries they did so without keeping any minutes to prevent that information from getting out. Everything was created to prevent giving the citizens of B.C. a true picture of what happened, and they're succeeding in that mission admirably."

There are bright spots to report that are also not included in the Games accounting.

For example, Whistler's own Games office spent $6 million, $3.5 million less than was budgeted - although that was largely the result of the province agreeing to pick up the tab for services like snow clearing, street maintenance, transportation and fire and rescue services.

It's also difficult to measure the impact of the Olympics. Reports from the provincial and federal governments suggest that the Games created 45,000 jobs and generated as much as $2.5 billion in gross domestic product.

PriceWaterhouseCoopers, which conducted the economic impact studies, estimates that the Games resulted in $500 million in additional tourism spending, a number which is expected to grow as more people travel to the province.

"Canada's tourism brand is now number one in the world," said Furlong.